Apple Inc. recently purchased 160 acres in Prineville, where it plans to build a data center. The parcel, acquired from Crook County for $5.6 million, is close to a large server farm built by Facebook in April 2011.
What is drawing these large tech companies to Prineville?
First, power. The city of Prineville prospered for decades with help from the timber industry, which assisted in the development of the existing power grid infrastructure. This power grid provides Prineville with a unique advantage over similarly sized rural areas.
Also, Oregon’s rivers generate relatively inexpensive hydropower, which is critical for power-hungry data centers. According to the Northwest Power and Conservation Council, server farms account for approximately three percent of the Northwest’s energy use (600 megawatts in 2008). With their massive energy bills, data center operators are constantly searching for ways to increase efficiency and reduce costs.
Documents from the Bonneville Power Administration indicate Apple’s facility will have a 31-megawatt capacity — enough electricity to power five cities the size of Prineville. Central Oregon’s mild climate also helps on this front; as computers need to be kept cool, the low temperatures, particularly at night, reduce air-conditioning costs.
Second, location. The somewhat remote location can be attractive as it allows companies to take advantage of lower property prices, while miles of fiber-optic cable ensure rapid data transfer with no performance loss. Both Facebook and Apple bought enough land to have plenty of room to expand.
Third, transportation infrastructure. Transport connections in Prineville are fairly well developed. The City of Prineville Railway, a city-owned railroad that connects to Union Pacific lines, helps keep shipment costs low with low diesel prices. The Prineville Freight Depot, a 50,000-square-foot facility located on a 40-acre site along the railway, serves as a regional multimodal transportation hub. Also, a Federal Aviation Administration grant recently enabled a runway expansion at the Prineville Airport, a general aviation airport located three miles southwest of the city’s central business district.
Finally, tax breaks. The tax breaks for companies operating in the rural enterprise zone are a major draw. These exemptions allow companies to avoid certain taxes (for example, on computers and other equipment) and can be worth millions of dollars annually.
What about the benefits to the community?
Data centers do not require large numbers of employees, but they can provide a valuable boost to the local economy, especially during the construction phase. Crook County’s unemployment rate is 15.8 percent, the highest in the state, so projects of any size and duration are welcome. Although Facebook employs only 55 at its Prineville facility, at least 200 are currently working there on a new expansion. This economic activity has a snowball effect, as income from new jobs is spent in the community.
Local governments also receive a boost beyond the increase in general economic activity because data centers generate franchise fees through their power consumption. In Apple’s case, the purchase from the county converted the land to taxable property, expanding the assessment rolls.
Government agencies recognize the need for growth and have proved willing to accommodate tech companies’ needs and spur economic activity. The Bonneville Power Administration, for example, at the urging of Oregon’s congressional delegation, recently accelerated plans to upgrade the Ponderosa Substation in Crook County and increase the transmission capacity. The upgrade’s completion is now expected a year ahead of schedule, in June 2013. This improvement will enable better service for the existing and planned data centers and will allow Prineville to pursue additional facilities —with its resources, it should have a good chance of success.
Gregory P. Lynch is a partner in the Bend office of Miller Nash LLP. His practice focuses primarily on business and commercial litigation matters, and he also represents clients in the drafting and negotiation of contracts, as well as other business law matters. He is in demand as a mediator and arbitrator, and serves as a judge pro tempore in state court.
greg.lynch@millernash.com, 541-383-5857
